And its passage came at an awkward moment, shortly after former ExxonMobil chief executive Rex Tillerson, who opposed the SEC regulation, was confirmed by the Senate as the new secretary of state.
The review act could be used to nullify regulations dating back to June last year, experts on the law say.
In this case, the SEC drafted the regulation in response to directions in the Dodd-Frank financial reform legislation. The directive was in an amendment backed by Sen. Ben Cardin (D-Md.) and then-Sen. Richard Lugar (R-Ind.). “Information is power,” Lugar said at the time. “It is power for shareholders and power for citizens living under oppressive regimes.”
The SEC said that it would “combat government corruption through greater transparency and accountability.”
But the SEC’s first version of the regulation was struck down by a federal district court in the District of Columbia after the American Petroleum Institute and U.S. Chamber of Commerce filed suit in 2012. That prompted a second attempt by the SEC. Because the final version was imposed near the end of the Obama administration, it now falls within the time frame that permits Congress and the president to use the review act to undo the regulation.
And now, the change in administrations has put the SEC rule in even greater peril. The new acting SEC chairman Michael S. Piwowar posted a statement on the SEC web site late Tuesday saying that he had “directed the staff to reconsider whether the 2014 guidance on the conflict minerals rule is still appropriate and whether any additional relief is appropriate.”
Piwowar said “While visiting Africa last year, I heard first-hand from the people affected by this misguided rule. The disclosure requirements have caused a de facto boycott of minerals from portions of Africa.” He said the effort to put an end to “conflict minerals” had hurt innocent people and businesses in the Congo in particular.
The oil industry has been particularly incensed about the regulation, complaining that the SEC rule would put them at a competitive disadvantage to foreign firms and be unduly expensive.
The SEC has argued that the rule would help fight corruption not only by companies but by governments around the world. It has also noted that global companies have begun to provide, on a voluntary basis, more comprehensive disclosures. In December 2015, then-commission member Luis A. Aguilar said that at least two large resource extraction companies were already providing payment disclosure on a project basis, and at least one other major resource extraction company was voluntarily providing other disclosures.
“Other global companies are also beginning to open their books to permit a window into their resource extraction payments to foreign governments,” he said.
But Jack Gerard, president of the American Petroleum Institute, said in an interview that big oil and gas companies compete with state-owned companies that do not have disclosure requirements and that the SEC rule would allow those companies to win contracts after seeing what U.S. firms pay.
“We think it’s a regulation that would have an unintended consequence of hurting U.S. business’s ability to compete,” he said. He said the SEC’s requirement that information be provided on a project basis was particularly objectionable.
He also cited the SEC’s own estimates of the cost the regulation would impose on oil, gas and mining companies. Gerard said compliance would cost between $96 million and $591 million annually for the entire industry. On an individual corporate basis, that would work out to $225,000 to $1.4 million a year, Gerard said.
ExxonMobil spokesman William F. Holbrook said “the SEC largely ignored industry’s comments and published a notice of a final rule that remains based on the [European Union’s] model and likely will adversely affect the ability of publicly traded companies to compete globally.”
Other groups disagree. “Rolling back this law will enable the corruption President Trump told us all he would end,” said Corinna Gilfillan, head of the U.S. office of Global Witness, an advocacy group that targets environmental and human rights abuses. “The oil industry has been striking backroom deals with dictators and tyrants for decades, wrecking developing economies and the environment in the process.”
She added that “this law helps prevent it by making sure people can see how much money is changing hands for their resources, and who is really benefiting from those deals.”
The House resolution was introduced by Rep. Bill Huizenga (R-Mich.), a member of the House Financial Services Committee. The measure now goes to the Senate for approval and then to Trump for signature. The lead sponsor in the Senate is Sen. James Inhofe (R-Okla.).
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